Mr Davies said: 'While they were having sex they were talking about him getting her pregnant so they could have a child to abuse.'
Cardiff Crown Court heard the sickening tape was made nearly four years before Watkins was arrested for a string of child sex abuse offences.
The jury was told police also discovered 'disgusting and abhorrent' online sex chats between Mjadzelics and Watkins, which had taken place three years after the video was made in May 2011.
During the chats, indecent images of children were sent by Watkins to Mjadzelics - and she sent replies saying she wanted to 'play for real'.
In the late-night messages, they also described the abuse they wanted to inflict on infants and animals.
In one exchange, Mjadzelics told Watkins: 'Part of me feels you get off on showing me stuff you can get away with, knowing that is what I have wanted since forever.'
Mjadzelics, of Doncaster, South Yorkshire, told Watkins she thought they had a 'deep connection that couldn't be matched'.
She signed off one message with the phrase: 'Child molesters till we die.'
Watkins replied to her saying: 'I am really happy you now know it is not just talk. The sooner we can be together the better.'
Mjadzelics was arrested as part of Operation Globe - a worldwide investigation into Watkins' vile paedophile activities.
Mr Davies said there was no dispute from Mjadzelics that she was in possession of four indecent images of children, had sent an indecent image of a child and had twice encouraged Watkins to send her an image of child rape.
But a jury heard she claimed she kept the images to trap Watkins and bring him to justice.
Mr Davies said: 'The law provides a defence to these crimes if the person can show they had a legitimate reason for doing so.
'Joanne Mjadzelics says she did have a legitimate reason for possessing and distributing indecent images of children in an attempt to bring Ian Watkins to justice.
'We say that is not the case.'
Mjadzelics claims she had abuse images on her computer so she could bring Watkins to justice
Mjadzelics denies four charges of possessing indecent images of children, two charges of distributing indecent images of children and one charge of encouraging Watkins to send her an indecent image of a child.
The 13 sex offences Watkins pleaded guilty to last November included the attempted rape of an 11-month old child. Police also found a stash of child porn videos - some of which he had made himself.
Originally, Watkins had pleaded his innocence to a string of offences - despite damning video evidence.
He changed his plea at the last minute - averting a trial - but then complained he had not realised that his guilty plea had made him 'look guilty'.
While awaiting sentencing last December, he was recorded by prison officials saying the whole thing was 'megalolz' during a telephone call to a friend.
The trial of Mjadzelics continues.
